Marchionne seeks bank support to buy UAW's Chrysler stock

Bryce G. Hoffman / The Detroit News

Posted:
02/17/2013 12:08:19 AM MST

Updated:
02/17/2013 11:58:26 PM MST

Armed with another year of strong financial results from a resurgent Chrysler Group LLC, Fiat-Chrysler CEO Sergio Marchionne met with some of the biggest banks on Wall Street last week and asked them to back his plan to purchase the rest of the Auburn Hills automaker from a trust run by the United Auto Workers, according to sources familiar with the situation.

Marchionne told the bankers that Chrysler's $1.7 billion profit and U.S. market share gains, coupled with his new turnaround plan for Fiat in Europe, make the group a better risk and a more attractive investment. Then he went behind closed doors with some of the banks and asked them to consider additional financing options, including a bridge loan, to give Fiat SpA the money it needs to buy out the shares held by the UAW, the sources said.

Just how much it would cost to do that remains a matter of serious contention between the company and the union. The two sides have been unable to agree on a pricing formula for the trusts' shares, prompting Fiat to file a lawsuit late last year and ask a federal judge to do it for them.

Marchionne had hoped for a ruling by the end of the year; now he is hoping for one by the end of March.

Goldman Sachs estimates that it would cost Fiat about $3 billion to purchase the UAW trusts' 41.5 percent stake in Chrysler, but others have put that figure be closer to $5 billion.

Marchionne has long said he wanted to purchase the rest of Chrysler from the union and had even set aside a pile of money for that purpose.

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But Marchionne started spending that money last fall on an ambitious plan to retool some of Fiat's European factories to produce higher-end automobiles.

Other options have been considered, including taking part of Fiat's stake in Ferrari public.

But Marchionne told investors last week that is not on the table, saying the group does not need to "monetize assets" at this time.

Certainly not if the banks step up -- and sources told The Detroit News that there is "a lot of interest" in underwriting a Fiat-Chrysler deal -- particularly if it can be done before the UAW's trust makes good on its threat to take part of Chrysler public again.

The trust began that process in January. Marchionne said the initial public offering process will take about eight months. And that gives him some time to find another solution.

"Ultimately, the (UAW trust) wants cash," Marchionne told reporters in Detroit last month. "Whether it happens through a larger transaction involving Fiat or whether it involves the IPO of Chrysler itself is almost secondary."